False Claim Act

The September 3, 2009, settlement is the third in which Pfizer signed a corporate integrity agreement (CIA).  The other agreements were signed in 2002 over Lipitor and in 2004 over epilepsy drug Neurontin.  The action was related to a “qui-tam” or “relator action”.  Under the False Claims Act the relators’ receive a portion of the recovery, in this case — the six whistle-blowers will receive payments of approximately $102 million from the federal recovery.  The relator action was filed in 2003, by a former Pfizer sales representative, and Golf War veteran.

* Largest combined federal and state health care fraud settlement in the history of the Department of Justice
* Resolution includes $1.3 billion in criminal fines and forfeiture and a combined federal and state civil False Claims Act settlement of $1 billion

Allocation of combined civil settlement amount by drug:

• Bextra: $502,524,316
• Geodon: $301,462,065
• Zyvox: $97,945,019
• Lyrica: $48,223,886
• Kickback Drugs: $49,844,714

• Bextra was marketed for acute pain and surgical pain, but approved only for arthritis and menstrual cramp;
• Geodon (ziprasidone) was marketed for depression, mood disorder, and dementia, but approved only for schizophrenia;
• Zyvox (linezolid) was marketed for infections caused by methicilllin-resistant Staphylococcus aureus but only approved for pneumonia.
• Lyrica (pregabalin) was promoted for chronic pain, but was only approved for fibromyalgia.

Pfizer Inc. ignored a 2005 FDA Warning Letter to stop promoting its antibiotic Zyvox(R) as clinically superior to the significantly less expensive, generic vancomycin when its own FDA-approved label indicated otherwise The drug giant also defrauded federal and state taxpayers by marketing Zyvox off-label, according to a qui-tam whistleblower complaint filed by Philadelphia law firm Sheller, P.C. and other documents unsealed with today’s $2.3 billion Pfizer settlement. The $2.3 billion settlement included off-label marketing allegations for the withdrawn arthritis drug Bextra(R), which was included in the Sheller complaint. Zyvox (linezolid) is an antibacterial agent that is approved by the FDA to treat certain types of infections, including nosocomial pneumonia and complicated skin and skin structure infections (“CSSSIs”) due to Methicillin Resistant Staphylococcus Aureus (“MRSA”). Worldwide sales of Zyvox totaled $1.115 billion in 2008.

          

The Federal False Claims Act and the Anti-kickback laws are a dangerous one two punch: Pfizer settlement 2.3 billion in penalties. originally appeared on Law Blog 2.0 on September 3, 2009.

The FCA, prior to the enactment of FERA, imposed liability on anyone who:

• Knowingly presents, or causes to be presented, to an officer or employee of the United States Government or a member of the Armed Forces of the United States a false or fraudulent claim for payment or approval;

• Knowingly makes, uses, or causes to be made or used, a false record or statement to get a false or fraudulent claim paid or approved by the Government; or

• Conspires to defraud the Government by getting a false or fraudulent claim allowed or paid.

In Allison Engine (Allison Engine Co. V. United States ex rel. Sanders, 471 F. 3d 610 (US 2008)), the US Supreme Court ruled that a government contractor was not liable under the FCA because it did not intend to present a false claim to the federal government.  In this case, a navy subcontractor allegedly used false information to receive payment, but from another contractor, not directly from the government.  The subcontractor falsely stated in a certificate of compliance (COC) the work was completed in compliance with Navy specifications and that the invoices were presented for payment to the shipyards.  However the invoices submitted by the shipyards (the contractor for building destroyers) submitted to the Navy did not contain the certificates of compliance.  (http://www.law.cornell.edu/supct/html/07-214.ZS.html).

Under FERA makes the mere fact of federal funding at some level is sufficient under FCA.  The statute also specifically adopts the “natural tendency” test with respect to materiality.  The FERA expands what constitutes a so-called “reverse false claim.”  It is now unlawful to “improperly avoid” or “decrease” an obligation to pay money to the United States.  This “obligation” includes the prohibition of the improper retention of overpayments, once discovered. 

The Act “clarifies” that the statute of limitations in cases in which the government intervenes relates back to the relator’s filing date, and eases the government’s ability to issue civil investigative demands.  The law takes effect on the date of enactment, except that–  subparagraph (B) of  section 3729(a)(1) of title 31, United States Code, as added by subsection (a)(1), shall take effect as if enacted on June 7, 2008, and apply to all claims under the False Claims Act (31 U.S.C. 3729 et seq.)  that are pending on or after the date.

          

Fraud Enforcement and Recovery Act of 2009 Expands FCA originally appeared on Law Blog 2.0 on May 29, 2009.